Recent Trends In Leave Applications: The Saskatchewan Farm Security Act

• Published date: 29 June 2022
• Subject Matter: Finance and Banking, Insolvency/Bankruptcy/Re-structuring, Charges, Mortgages, Indemnities, Financial Services, Insolvency/Bankruptcy
• Law Firm: CLC (Canadian Litigation Counsel)
• Author: Fashia M. Richards (McDougall Gauley LLP) and Nicole C. Krupski (McDougall Gauley LLP)

Section 9(1)(d) of The Saskatchewan Farm Security Act ("SFSA") prohibits creditors from commencing an action against farm land without first obtaining an order of the Court.

Before such an application can be made, however, the creditors must first complete a lengthy process that includes:

• serving a notice on the farmer and the Farm Land Security Board ("FLSB");
• waiting the prescribed 150 days; and
• participating in a mandatory mediation with the farmer that is conducted by the FLSB.

If no arrangement is concluded, the FLSB prepares a written report to the Court commenting on, among other things, whether the farmer:

On the subsequent application, the creditors have the burden of establishing either of these factors, failing which the application is liable to be dismissed, forcing the creditors to start the process over again.

The SFSA further instructs that, in considering the creditors' application, the Court is to give primary consideration to the FLSB's report, which reports some creditors perceive as invariably favouring the farmer. Where this occurs, the FLSB report presents an additional hurdle to enforcement, as the farmer already enjoys a statutory presumption that it has a reasonable possibility of meeting its mortgage obligations and is making a sincere and reasonable effort to meet its mortgage obligations.

Two recent cases illustrate the potential issues that can arise and the Court's response.

Farm Credit Canada v Palmer, 2021 SKQB 50

The farmer defaulted on four credit facilities owed to FCC, one of which was a mortgage obligation for which the mortgage securing the indebtedness was registered against two quarter-sections of land, bringing the matter under the purview of the SFSA. In response to the application before the Court, the FLSB produced three reports in accordance with its obligation under the SFSA for the Court's primary consideration. The last report of the FLSB concluded that the respondent had "a reasonable possibility of meeting the obligations of a refinanced mortgage." The Court found there was a lack of sufficient financial information from which the FLSB could form this conclusion.

The Court analyzed the purpose and function of the FLSB reports. The source of the FLSB's power to make these reports is derived from s. 12(12) of the SFSA, which establishes the report requirements. Two germane items included in the report are whether the farmer has a reasonable possibility of making his mortgage payments and whether the farmer...